From Kaplan:
None of the solutions in the explanation look like the Cobb-Douglas production function of:
What gives?
None of the solutions in the explanation look like the Cobb-Douglas production function of:
What gives?
As the data shown in the case is about “GROWTH RATES” and not levels or stocks of each resource (tech, capital or labor), the following formula must be converted using natural logarithms, so:
is equivalent to:
Each Ln(…) in the formula reflects the data in growth rates.
Remember that T, K or L are values, stock of something, for example USD 1bn of capital and Y is production or output, also valued in $ terms. This is why u should expect the exam to provide “growth rates” for solving this kind of problems instead of stock levels.